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State of Atlanta Market

State of Atlanta Market. Joshua Goldfarb, Managing Director. Defining the Two Cities. Class A & B+: 1990 to Newer Construction. Class B- & C: 1989 to Older Construction. History of Why V alues A re as They Are Today. Class A & B+ Movement toward renting and away from purchasing a home

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State of Atlanta Market

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  1. State of Atlanta Market Joshua Goldfarb, Managing Director

  2. Defining the Two Cities • Class A & B+: 1990 to Newer Construction • Class B- & C: 1989 to Older Construction

  3. History of Why Values Are as They Are Today • Class A & B+ • Movement toward renting and away from purchasing a home • Availability of Fannie Mae and Freddie Mac financing • Lack of financing for other property types (office & retail) • Low interest rates • Leverage to low cap rates CONCLUSION: Leads to Low Cap Rates and Strong Values

  4. History of Why Values Are as They Are Today • Class B- & C • Lack of attractive financing • No Fannie Mae or Freddie Mac • Asset operations must be stable for agency financing - Local balance sheet lenders offer financing, but very conservatively • Tenants are struggling to maintain consistent income thus rental rates are low and delinquencies are high • Notable high level of foreclosures has thrown supply and demand out of balance, creating an over-supply CONCLUSION: Leads to Weak, Stale Values

  5. Who is Investing in Atlanta • Class A & B+ • Pension Funds • REITS • Wall Street • Sophisticated Syndicators • Class B- & C • Some local operators • Mostly foreign investors taking advantage of currency exchange rates and Atlanta’s recent depressed state

  6. Values • Class A & B+ • Cap Rates: • Class A ranges from 5% to 6% • Class B+ ranges from 5.5% to 6.5% • IRR: • Class A ranges from 8% to 12% • Class B+ ranges from 10% to 15% Class A Class B+

  7. Values • Class B- & C • Cap Rates: • Class B- ranges from 7% to 8% • Class C ranges from 8% to 9% • IRR: • Class B- ranges from 15% to 20% • Class C ranges from 20% to 25% Class A Class B+ Class B- Class C

  8. Development • Atlanta Multifamily market has seen development activity over the past 12 months and is expected to continue through 2013 • Strongest activity has been in the in-town markets (Buckhead & Midtown) • Why? • Increased Generation “Y” presence in the job market is driving demand for in-town apartments • Buckheadis encouraging walkability of its streets with special zoning that lends itself to a friendly pedestrian and retail environment • In-town market has strong average rental rates and low vacancy rates compared to suburban markets • Availability of debt for in-town markets has accumulated into an impressive pipeline - 5 projects have broken ground and another 15 are up for proposal

  9. A rendering of JLB Partners' Village at Buckhead on Pharr Road, the first of a slew of new Buckhead multifamily developments to be delivered starting next year. Image courtesy of JLB Partners.

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